For the auto business, "the pain is just beginning," according to
the Nomura analyst Masataka Kunugimoto and his team. "We now
expect global auto demand to be down 3%," year on year, in 2019,
he told clients recently.

He is not alone. At bank after bank, analysts are coming round to
the idea that the world may have passed "peak car" and that in
the future people will need fewer personal vehicles.

Certainly, they are telling clients, diesel vehicles will
collapse into a niche as their polluting exhausts are regulated
out of existence. Petrol/gasoline vehicles will be next, as
governments in Europe and the United States set dates for
manufacturers to switch their models to electric.

"The industry is right now staring down the barrel of what we
think is going to be a significant downturn," Bank of America's
John Murphy told a conference last week. The decline of
sales in China "is a real surprise," he added.

"We expect passenger vehicle sales in Europe (ex-Russia) to
fall 4%" year-on-year, to 15.06 million units in 2019, Nomura's
Kunugimoto said. In the US, he believes, sales will go down 3%,
to 16.8 million cars.

"In our view, the peak in auto sales is clear," Bank of
America's Michelle Meyer and Anna Zhou told clients recently. "A
core view of John Murphy, our auto equity analyst, is that the
auto cycle has peaked. And he expects further slowdown," with US
sales slumping to 16.3 million - lower than Nomura's estimate.
"He sees new auto sales heading lower largely due to the
'tsunami' of used vehicles supply which depresses the prices of
used vehicles (making them more attractive than new)."

Their colleague Ethan S. Harris agrees: "There is a negative
narrative developing in the auto sector as inventories climb amid
softening demand. Inventory for light trucks and SUVs has been
climbing to uncomfortably high levels."

The most dramatic example of just how vulnerable automakers are
came from Britain last week. The country prides itself on being
the Detroit of Europe. But the Society of Motor Manufacturers and
Traders reported that
total car production in the UK was down 45%, year on year, in
April. Commercial vehicle exports collapsed a staggering 89%.

Total car ownership is in decline. Here are the numbers for new
car registrations in the UK:

Pantheon Macroeconomics

The trend is reflected across Europe. This data shows car
registrations in the eurozone, the 19 countries that use the euro
as a currency:

Pantheon Macroeconomics

Europe, with its densely populated countries and its public
transport options, is one thing. The US - wide-open spaces, car
culture, and lack of train service - is another. But even
Americans began to tone down their car purchases sometime in
2016, as this chart from Bank of America shows:

In the US, Bank of America published a note with the headline
"shifting from second gear to reverse."

"A weakening in the auto cycle will serve as a drag to the
economy," Meyer and Zhou wrote. "There are a few channels by
which the decline in autos will impact GDP. Autos influence GDP
through consumer spending and production, with inventories
serving as the residual between what is produced and sold. When
sales weaken, it will lead to weaker consumer spending."

They added: "Motor vehicle production is already on course to be
a drag this year, slicing 0.14pp [percentage points] from 1Q GDP
growth. We expect it to cut nearly 0.2pp to annual growth this
year. Relative to last year, that is a reversal of 0.4pp."

The decline won't be total. Cars won't go the way of the horse
and cart. More likely, the aftermath of "peak car" will look like
the broadcast television business: a long, slow decline that
takes years to play out.

"It doesn't feel great but it is manageable," Bank of America's
team wrote.